I prefer using rate of change over absolute value. When I chart % change quarter over quarter, I can clearly see the trend reversed in 04. You are much better at statistics than I am, so perhaps you can explain why the derivative is a better predictor than the absolute value. Actually, I see the second derivative as important: the point where the slope is zero. It is usually at those points, that indicate a reversal in the cycle. If the data point reverses only a teeny bit, or for only one or two times, then it turns out to be noise. That is my conclusion from looking at the second derivative, visually.

Likewise, building permits clearly peaked 6 months earlier if you use % change. I think looking at the rate of change more clearly indicates a reversal in the trend. So using this method, I get a sell signal as I noted above when the building permits and sales peak at the top or bottom, and change direction.

Maybe there is nothing to modify. I’m just not clear when your model generates a buy or sell signal.